[Federal Register Volume 89, Number 170 (Tuesday, September 3, 2024)]
[Notices]
[Pages 71770-71773]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-19663]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100837; File No. SR-ISE-2024-21]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
of Amendment No. 1 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1, To Adopt Rules To 
Permit the Listing of Two Monday Expirations for Options on SPDR Gold 
Shares, iShares Silver Trust, and iShares 20+ Year Treasury Bond ETF

August 27, 2024.

I. Introduction

    On May 16, 2024, Nasdaq ISE, LLC (``Exchange'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change to permit the 
listing of two Monday expirations for options on United States Oil 
Fund, LP (``USO''), United States Natural Gas Fund, LP (``UNG''), SPDR 
Gold Shares (``GLD''), iShares Silver Trust (``SLV''), and iShares 20+ 
Year Treasury Bond ETF (``TLT''). The proposed rule change was 
published for comment in the Federal Register on May 30, 2024.\3\ On 
July 9, 2024, pursuant to Section 19(b)(2) of the Act,\4\ the 
Commission designated a longer period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.\5\ On August 21, 2024, the Exchange filed Amendment No. 1 to 
the proposed rule change, which superseded the original proposed rule 
change in its entirety.\6\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 100223 (May 23, 
2024), 89 FR 46926.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 100478, 89 FR 57482 
(July 15, 2024) (designating August 28, 2024 as the date by which 
the Commission shall either approve, disapprove, or institute 
proceedings to determine whether to disapprove the proposed rule 
change).
    \6\ In Amendment No. 1, the Exchange narrowed the scope of the 
proposed rule change to remove all aspects of the proposal that 
would have permitted the Exchange to list two Monday expirations for 
options on USO and UNG. The full text of Amendment No. 1 is 
available on the Commission's website at: https://www.sec.gov/comments/sr-ise-2024-21/srise202421-509815-1478802.pdf.
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    The Commission did not receive any comments. The Commission is 
publishing this notice to solicit comments on Amendment No. 1 from 
interested persons and is approving the

[[Page 71771]]

proposed rule change, as modified by Amendment No. 1, on an accelerated 
basis.

II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1 \7\
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    \7\ For a full description of the proposed rule change, refer to 
Amendment No. 1, supra note 6.
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    Currently, the Exchange may open for trading series of options on 
certain symbols that expire at the close of business on each of the 
next two Mondays, Tuesdays, Wednesdays, and Thursdays, respectively, 
that are business days beyond the current week and are not business 
days in which standard expiration series, Monthly Options Series or 
Quarterly Options Series expire (``Short Term Option Daily 
Expirations'').\8\ Table 1 in Supplementary Material .03 to Options 4, 
Section 5 specifies each symbol that qualifies as a Short Term Option 
Daily Expiration as well as the permitted expiration days.\9\ Today, 
the Exchange may list no more than a total of two Monday, Tuesday, 
Wednesday, and Thursday expirations on the SPDR S&P 500 ETF Trust 
(``SPY''), the Invesco QQQ Trust (``QQQ''), and the iShares Russell 
2000 ETF (``IWM''). In addition, the Exchange permits the listing of 
two Wednesday expirations for options on GLD, SLV, and TLT 
(collectively, ``ETPs'').\10\
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    \8\ See Supplementary Material .03 to Options 4, Section 5.
    \9\ See id.
    \10\ See Securities Exchange Act Release No. 98905 (November 13, 
2023), 88 FR 80348 (November 17, 2023) (SR-ISE-2023-11) (``Wednesday 
ETP Expiration Order''). In addition, the Exchange may list two 
Wednesday expirations on USO and UNG. See Supplementary Material .03 
to Options 4, Section 5.
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    The Exchange proposes to expand the Short Term Option Series 
Program to permit the listing of two Monday expirations beyond the 
current week for options on GLD, SLV, and TLT (``Monday ETP 
Expirations''). The proposed Monday ETP Expirations would be similar to 
the current Monday SPY, QQQ, and IWM Short Term Option Daily 
Expirations set forth in Supplementary Material .03 to Options 4, 
Section 5, such that the Exchange may open for trading on any Friday or 
Monday that is a business day (beyond the current week) series of 
options on GLD, SLV, and TLT to expire on any Monday of the month that 
is a business day and is not a Monday in which standard expiration 
options series, Monthly Options Series, or Quarterly Options Series 
expire. In the case of a series that is listed on a Friday and expires 
on a Monday, it must be listed at least one business week and one 
business day prior to the expiration.\11\ In the event a Monday ETP 
Expiration would expire on a Monday and that Monday is the same day 
that a standard expiration options series, Monthly Options Series, or 
Quarterly Options Series expires, the Exchange would skip that week's 
listing and instead list the following week; therefore, the two weeks 
would not be consecutive.\12\ As is the case with other equity options 
series listed pursuant to the Short Term Option Series Program, the 
proposed Monday ETP Expirations series would be p.m.-settled.
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    \11\ See Amendment No. 1, supra note 6, at 6.
    \12\ See id. Today, Monday expirations in SPY, QQQ, and IWM 
similarly skip the weekly listing in the event the weekly listing 
expires on the same day in the same class as a standard expiration 
options series, Monthly Options Series, or Quarterly Options Series. 
See id.
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    Monday ETP Expirations would be treated similarly to existing 
Monday SPY, QQQ, and IWM Expirations. The interval between strike 
prices for the proposed Monday ETP Expirations would be the same as 
those currently applicable to the Short Term Option Series Program.\13\
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    \13\ See id. at 7. Specifically, the Monday ETP Expirations 
would have a strike interval of (i) $0.50 or greater for strike 
prices below $100, and $1 or greater for strike prices between $100 
and $150 for all option classes that participate in the Short Term 
Option Series Program, (ii) $0.50 for option classes that trade in 
one dollar increments and are in the Short Term Option Series 
Program, or (iii) $2.50 or greater for strike prices above $150. See 
id.
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    The Exchange represents that it would implement this rule change 
within 30 days after Commission approval and would issue an Options 
Trader Alert to notify Members of the implementation date.\14\
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    \14\ See id. at 19.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 1, is consistent with the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\15\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendment No. 1, is consistent 
with Section 6(b)(5) of the Act,\16\ which requires, among other 
things, that the Exchange's rules be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest.
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    \15\ In approving this proposed rule change, as modified by 
Amendment No. 1, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
    \16\ 15 U.S.C. 78f(b)(5).
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    In support of its proposal, the Exchange states it does not believe 
that any market disruptions will be encountered with the introduction 
of Monday ETP Expirations.\17\ The Exchange states that it currently 
trades Short Term Option Daily Expirations on SPY, QQQ, and IWM, 
including Short Term Option Daily Expirations that expire on Mondays, 
and has not experienced any market disruptions nor issues with 
capacity.\18\ In addition, the Exchange states it has not experienced 
any market disruptions or issues with capacity in expanding the three 
ETPs to the Wednesday expirations.\19\ The Exchange states it has 
surveillance programs in place to support and properly monitor trading 
in Short Term Option Series that expire Monday for SPY, QQQ, and IWM, 
and the Exchange states that it has the necessary capacity and 
surveillance programs in place to support and properly monitor trading 
in the proposed Monday ETP Expirations.\20\ The Exchange states that 
its proposed expansion of the Short Term Option Series Program to 
permit GLD, SLV, and TLT Monday Expirations would add a small overall 
number of weekly expiration dates because the Exchange will limit the 
number of Short Term Option Daily Expirations for these ETPs to two 
Monday expirations.\21\
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    \17\ See Amendment No. 1 at 8.
    \18\ See id. at 8-9.
    \19\ See id. at 9.
    \20\ See id.
    \21\ See id. at 10. According to the Exchange, expanding the 
Short Term Option Series Program in this way would account for the 
addition of 4% (GLD), 8% (SLV), and 4% (TLT) of strikes for the 
respective symbol. See id. With respect to the impact on the Short 
Term Option Series Program for each symbol overall, the impact would 
be a 13% (GLD), 20% (SLV), and 18% (TLT) increase in strikes for the 
respective symbol. See id. at 10-11. With respect to the impact on 
the Short Term Option Series Program overall, the impact would be a 
0.05% (GLD), 0.03% (SLV), and 0.04% (TLT) increase in strikes for 
the respective symbol. See id. at 11.
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    The Exchange examined the average daily contracts traded in GLD, 
SLV, and TLT five months before and five months after the introduction 
of Wednesday expirations to assess whether there was new interest from 
adding these alternative expirations. According to data provided by the 
Exchange, there was a general volume increase in terms of average daily 
contracts traded in these three symbols in the five-month period 
following the introduction of Wednesday expirations.\22\ Based on that 
data, the Exchange believes there is general demand for alternative

[[Page 71772]]

expirations in GLD, SLV, and TLT, and that new interest would be 
attracted by adding alternative expirations (rather than existing 
interest being cannibalized).\23\
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    \22\ See id. at 13.
    \23\ See id. The Exchange performed a similar analysis of 
average daily contracts traded in SPY and QQQ five months before and 
five months after the introduction of Tuesday and Thursday 
expirations on those symbols. See id. at 12. The Exchange's data 
similarly showed a volume increase in terms of average daily 
contracts traded in SPY and QQQ in the period following the 
introduction of Tuesday and Thursday expirations, which the Exchange 
states indicates the existence of genuine new interest in 
alternative expirations for those symbols. See id. at 12-13.
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    The Exchange also examined the lifecycle volume of GLD, SLV, and 
TLT in terms of average daily contracts traded, going from 50 days 
before expiration to the expiration date, to see how that lifecycle 
volume changed before and after the introduction of Wednesday 
expirations. The data provided by the Exchange shows an increase in 
volume in terms of average daily contracts traded as the expiration 
date approaches.\24\ This is consistent across all three symbols as 
well as before and after the addition of Wednesday expirations.\25\
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    \24\ See id. at 14-16.
    \25\ See id.
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    Additionally, the Exchange provided data that shows post-close 
movements between 4:00 and 5:30 p.m. Eastern Time that indicates that 
GLD, SLV, and TLT are generally less volatile (strike-wise) than SPY, 
QQQ, and IWM.\26\ Further, the Exchange provided data that shows that 
GLD, SLV, and TLT are generally less volatile during the last 30 
minutes of trading than SPY, QQQ, and IWM.\27\
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    \26\ See id. at 16.
    \27\ See id. at 17.
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    The Exchange's proposal is reasonably designed as a limited 
expansion of Monday expirations. As noted above, the Exchange currently 
offers Short Term Option Daily Expirations on SPY, QQQ, and IWM, 
including Monday expirations. The Exchange proposes to limit the number 
of Monday ETP Expirations to two expirations beyond the current week. 
The Exchange also proposes to limit the listing of additional Monday 
expirations to the three ETPs, which generally have similar or lower 
volatility in terms of post-closing and end of day volatility as SPY, 
QQQ, and IWM. And, like SPY, QQQ, and IWM, the ETPs have multiple 
highly-correlated instruments available for hedging.\28\ In addition, 
the Exchange's data showing an increase in average daily contracts 
traded after the introduction of Wednesday expirations on the ETPs may 
indicate a demand for alternative expirations in the three ETPs. 
Further, the Monday ETP Expirations will be subject to the same rules 
for Monday expirations in SPY, QQQ, and IWM.
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    \28\ See Wednesday ETP Expiration Order, supra note 10, at 
80349.
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    Based on the foregoing, the Commission believes the proposal 
reasonably balances the Exchange's desire to accommodate market 
participants by offering a wider array of investment opportunities with 
the need to avoid unnecessary proliferation of options series. 
Additionally, this limited expansion of Monday ETP Expirations may 
provide the investing public and other market participants more 
flexibility to closely tailor their investment and hedging decisions 
using options on these ETPs, thus allowing them to better manage their 
risk exposure. For these reasons, the Commission finds that the 
proposed rule change, as modified by Amendment No. 1, is consistent 
with Section 6(b)(5) of the Act \29\ and the rules and regulations 
thereunder applicable to a national securities exchange.
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    \29\ 15 U.S.C. 78f(b)(5).
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IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule 
Change

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendment No. 1 is consistent with the 
Act. Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-ISE-2024-21 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-ISE-2024-21. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-ISE-2024-21 and should be 
submitted on or before September 24, 2024.

V. Accelerated Approval of the Proposed Rule Change, as Modified by 
Amendment No. 1

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 1, prior to the thirtieth day 
after the date of publication of notice of the filing of Amendment No. 
1 in the Federal Register. As discussed above, in Amendment No. 1, the 
narrowed the scope of the proposed rule change to remove all aspects of 
the proposal that would have permitted the Exchange to list two Monday 
expirations for options on USO and UNG. The Commission believes that 
Amendment No. 1 merely narrows the scope of the proposed rule change, 
does not otherwise alter the substance of the proposed rule change, and 
does not raise any novel regulatory issues. Accordingly, the Commission 
finds good cause, pursuant to Section 19(b)(2) of the Act,\30\ to 
approve the proposed rule change, as modified by Amendment No. 1, on an 
accelerated basis.
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    \30\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\31\ that the proposed rule change (SR-ISE-2024-21), as modified by 
Amendment No. 1, be and hereby is, approved on an accelerated basis.
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    \31\ 15 U.S.C. 78f(b)(2).


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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-19663 Filed 8-30-24; 8:45 am]
BILLING CODE 8011-01-P